Financial markets are overwhelmingly betting that the Federal Reserve will lower interest rates this week, with futures pricing, prediction platforms, and broader asset moves all converging on a quarter-point cut as the expected outcome.
Activity across equities, metals, and crypto strengthened on Tuesday as rate-cut confidence solidified.
What Happened
Data from the CME’s FedWatch tool showed traders assigning nearly 90% odds that policymakers shift the federal funds rate down to the 3.50%–3.75% range, leaving only a narrow probability that the Fed maintains its current target.
Futures positioning now reflects not just optimism but near-certainty that easing is imminent.
Prediction markets are even more emphatic.
On Polymarket, contracts implying a 25-basis-point cut traded at roughly 96% by early afternoon on December 9, with a deeper 50-bps move barely registering and the likelihood of no policy change shrinking to the low single digits. A rate hike has been priced out almost entirely.
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Kalshi’s markets showed a similar consensus, placing the odds of a standard cut around 95%, with all other scenarios hovering around 5% or lower.
Why It Matters
Tuesday’s momentum was further reinforced by White House economic adviser Kevin Hassett, who said the Fed has “plenty of room” to continue easing, aligning with President Trump’s broader push for lower rates.
Speaking at the WSJ CEO Council, Hassett suggested additional cuts would be appropriate if economic conditions remain supportive.
With expectations so firmly entrenched, the key question now is how markets will digest the actual decision.
When investors crowd so heavily into one outcome, price strength ahead of the announcement can quickly shift into a “sell-the-news” reaction, especially if the Fed’s messaging fails to match the market’s enthusiasm.
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